What to do about debt if you lose your job

Money’s a big worry when you’ve been made redundant or lost your job – and nothing gets you down like debt. Even if you’ve had a decent redundancy payout, keeping up repayments could put a real strain on your finances. Here are some simple steps to keep on top of things.Here are some simple steps to help with your debt.

Step 1 – Make a list of all your debts

List all of your debts, including the ones you’d like to conveniently forget about.

Mortgage, car loan, credit cards, store cards, other loans, arrears on Council Tax or utility bills. They’ll all need to be tackled at some stage, so you need to start off with a clear picture of where you stand. including the outstanding balances and how much you pay each month.

Step 2 – Claim on insurance

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Case study

“I had a few sleepless nights worrying about paying off my credit card bill when I was made redundant. Then I found out that the payment protection insurance I’d taken out had it covered. Talk about a big relief!” – Lisa

Step 3 – Prioritise your remaining debts

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Always give priority to your mortgage or rent and household bills. Your credit card company may be quicker to remind you of a missed payment, but don’t be tempted to take risks with the roof over your head.

Losing your job can easily tip you over from a situation where you were managing your repayments into one where they’re starting to feel out of control.

Start by being clear which of your debts are priority.

Priority debts

Things like your mortgage, your rent and any tax or utility bills are classed as priority debts. Fail to pay these debts and you could lose your home or be evicted, have your electricity or gas cut off, or have essential items (such as your car) repossessed.

Non-priority debts

Things like credit card bills, unsecured loans, bank overdrafts and catalogue debts are classed as non-priority debts. The consequences for non-payment of these aren’t quite as great. The companies you owe can’t take your home, for example. At the worst, you could be taken to court and ordered to pay an amount that is judged to be affordable from the income that you have.

Step 4 – Work out your budget

Get a clear idea of what you’ve got coming in and what’s going out. The amount that’s left after paying for your household bills, your living expenses, plus repayments and interest on anything you owe is what’s available to start paying off your debts more quickly.